Summary The proposed Cloud and AI Development Act (CADA), COM(2026) 502 final, introduces two distinct fee mechanisms to ensure the financial sustainability of its new infrastructure: the EuroCloud Federation and the Commission's joint procurement activities. As proposed in Article 36 and Article 40 (referenced in the context of Article 38 arrangements), these fees are levied exclusively on participating public entities (Union entities and Member State contracting authorities), not on cloud service providers. The revenues generated are classified as "internal assigned revenues," meaning they are ring-fenced to cover the specific operational costs of these initiatives, thereby limiting pressure on the general EU budget and ensuring a cost-recovery model rather than a profit-generating one.

Detail

The Cloud and AI Development Act (CADA) proposal seeks to transform the European cloud and AI ecosystem by establishing a sovereign infrastructure layer and leveraging public procurement power. To achieve this without placing an undue burden on the Multiannual Financial Framework (MFF), the proposal establishes a self-sustaining financial model based on user fees. This approach is detailed primarily in Article 36 (regarding the EuroCloud Federation) and Article 40 (regarding joint procurement), operating within the governance framework set out in Article 38.

1. Fees for the EuroCloud Federation (Article 36)

The EuroCloud Federation is established under Article 34 to facilitate the sharing of public sector data centre and cloud computing services between Union entities and public sector bodies. Article 36 specifically addresses the financial administration of this federation.

Who pays? The fees are levied on the members of the EuroCloud Federation. Participation is voluntary for Union entities and public sector bodies. However, once an entity joins to share or use capacity, it becomes liable for the administrative fees.

What do the fees cover? According to Article 36(1), the costs arising from the Commission's activities under the EuroCloud Federation chapter are jointly financed by the members through fees. These activities explicitly include:

  • Assessing membership applications: Evaluating requests from entities wishing to join the federation.
  • Platform administration: Establishing and maintaining the digital platform that facilitates the sharing of services (as mandated by Article 34(3)).
  • Operational management: Covering the administrative and technical costs required to run the federation's governance and sharing mechanisms.

Initial Costs and Reimbursement The proposal acknowledges that setting up the federation requires upfront investment. Article 36(2) provides that if initial establishment costs are initially borne by the general budget of the Union, they must be reimbursed by the EuroCloud members. This reimbursement must occur over a period not exceeding three years from the date the costs were incurred. This ensures that the long-term operational model is self-sustaining while allowing for an initial bridge from the EU budget.

Legal Classification: Internal Assigned Revenues A critical feature of this funding model is found in Article 36(3). It states that revenues generated by these fees constitute "internal assigned revenues" within the meaning of Article 21(3)(a) of Regulation (EU, Euratom) 2024/2509 (the Financial Regulation).

  • Ring-fencing: This classification means the money collected is not pooled into the general EU budget. Instead, it is legally assigned to cover the specific costs of the EuroCloud Federation activities.
  • Surplus handling: Any revenue remaining after covering these specific costs is entered into the general budget of the Union, ensuring no windfall profits are retained by the specific initiative.

2. Fees for Joint Procurement Activities (Article 40)

While Article 38 establishes the governance arrangements, the Steering Committee, and the agreement framework for the Commission acting as a central purchasing body, Article 40 details the specific financial rules for these procurement activities. The Commission is empowered to procure data centre services, cloud computing services, software, and AI systems on behalf of participating entities.

Who pays? The fees are levied on the "participating entities." As defined in Article 37(1), these include:

  • Contracting authorities of Member States.
  • Union entities (institutions, bodies, offices, and agencies).
  • Partner organizations selected by the Commission.

What do the fees cover? Article 40(1) mandates that costs arising from the procurement activities are jointly financed by participating entities through fees. These costs encompass:

  • Operational costs: The direct expenses of running the procurement procedures.
  • Platform development: The creation and maintenance of the common procurement platform.
  • Ancillary support: Services such as technical infrastructure, advice on preparing procedures, and invoicing, as outlined in Article 37(4).

Setting and Calculating Fees The proposal ensures fees are not arbitrary. Article 40(4) stipulates that fees must be:

  • Set in advance.
  • Proportionate to the estimated costs of the activities.
  • Determined in a cost-effective way, reflecting practices of comparable procurement frameworks.
  • Sufficient to cover the costs incurred.

To operationalize this, Article 40(5) empowers the Commission to adopt implementing acts to lay down detailed rules for determining fees, including the estimated costs, individual amounts, and payment conditions.

Reimbursement of Establishment Costs Mirroring the EuroCloud model, Article 40(2) allows for initial establishment costs of the common procurement framework to be borne by the general budget of the Union. If this occurs, participating entities must reimburse these costs over a period not exceeding three years.

Legal Classification: Internal Assigned Revenues Consistent with the EuroCloud Federation, Article 40(3) classifies revenues from joint procurement fees as "internal assigned revenues." This ensures strict adherence to the cost-recovery principle: funds are used solely to finance the procurement activities, and any surplus is transferred to the general budget.

3. Limiting Pressure on the EU Budget

The introduction of these fee structures is a deliberate strategy to ensure the financial viability of CADA's ambitious goals without straining the EU's general budget. The Explanatory Memorandum to the proposal explicitly states that the additional administrative expenditure associated with new tasks will be "mostly financed through fee-based revenue streams."

This approach achieves three key objectives:

  1. Budget Neutrality: By using internal assigned revenues, the Commission ensures that the operational costs of the EuroCloud Federation and joint procurement do not require additional appropriations from the MFF. The initiatives fund themselves through the users who benefit from them.
  2. Sustainability: The fee model creates a sustainable funding stream that allows these mechanisms to scale. As more entities join the Federation or participate in joint procurement, the revenue base grows to cover increasing operational complexity.
  3. Efficiency: The requirement that fees be "proportionate" and "cost-effective" prevents administrative bloat. The Commission is incentivized to manage these activities efficiently to keep fees low for participating entities.

What this means for you

For cloud service providers, data centre operators, and public sector bodies, understanding this financial architecture is vital for strategic planning.

For Cloud Service Providers and Data Centre Operators

  • No Direct Fees: You are not the entity paying these fees. The costs are levied on the public sector buyers (the "participating entities" or "members").
  • Market Stability: The fee-based model ensures that the EuroCloud Federation and joint procurement mechanisms are financially robust. This reduces the risk of these initiatives being defunded or scaled back, providing a stable, long-term market for European providers to compete in.
  • Competitive Dynamics: Since the fees are borne by the buyers, public entities may factor these administrative costs into their total cost of ownership calculations. However, the primary goal of joint procurement is to achieve economies of scale, which typically results in lower unit prices for the services themselves, potentially offsetting the administrative fee.
  • Procurement Transparency: When bidding for contracts awarded through the Commission's joint procurement framework, be aware that the contracting authority has access to a centralized platform funded by these fees. This may streamline the procurement process but also means the Commission acts as a central intermediary.

For Public Sector Bodies and Union Entities

  • Budgeting for Participation: If your organization plans to join the EuroCloud Federation or participate in joint procurement, you must budget for these fees. They are a mandatory cost of participation, not an optional contribution.
  • Cost-Benefit Analysis: While fees apply, the value proposition lies in aggregated purchasing power (for joint procurement) and access to idle capacity (for the Federation). The fees are designed to be cost-recovery, meaning they should be significantly lower than the costs of setting up similar mechanisms independently.
  • Reimbursement Timeline: Be aware that if your entity joins after the initial setup phase, you may still be liable for a portion of the reimbursement of initial establishment costs if the general budget covered them initially, as per the three-year reimbursement rule.

For National Competent Authorities

  • Oversight: While you do not pay the fees directly, you should monitor how these mechanisms are implemented in your Member State to ensure that the fee structures are transparent and that the benefits of the Federation and joint procurement are accessible to local public bodies.

Common misconceptions

Misconception 1: Cloud providers pay these fees directly. False. The fees under Article 36 and Article 40 are levied exclusively on the members of the EuroCloud Federation and the participating entities in joint procurement (i.e., public sector bodies and Union entities). Cloud service providers and data centre operators are the suppliers in these transactions and are not charged these administrative fees. They compete for contracts awarded through these mechanisms.

Misconception 2: These fees are taxes or contributions to the general EU budget. False. These fees are legally classified as "internal assigned revenues." This is a specific budgetary category under the Financial Regulation (Regulation (EU, Euratom) 2024/2509). It means the revenue is ring-fenced to cover the specific operational and administrative costs of the EuroCloud Federation and joint procurement activities. They are not general contributions to the EU budget, although any surplus after covering costs is entered into the general budget.

Misconception 3: The fees are profit-making for the Commission. False. The fees are strictly cost-recovery mechanisms. Article 40(4) explicitly states that fees must be "proportionate to the estimated costs" and "sufficient to cover those costs." The Explanatory Memorandum reinforces that the goal is "budget neutrality" for these specific tasks, not profit generation. The Commission cannot retain surplus funds for these activities; any excess must be transferred to the general budget.

Misconception 4: All public sector cloud procurement will incur these fees. False. These fees apply only to cloud services procured through the specific mechanisms established by CADA:

  1. The EuroCloud Federation (for sharing capacity between members).
  2. The Commission's joint procurement activities (where the Commission acts as a central purchasing body under Article 37 and Article 38). Public sector bodies can still procure cloud services through standard national procedures without incurring these specific EU-level fees, although they would not benefit from the aggregated purchasing power or the shared capacity of the Federation.

Misconception 5: The fees are fixed and cannot change. False. Article 40(5) empowers the Commission to adopt implementing acts to lay down detailed rules for determining fees. This means the specific amounts, calculation methods, and payment conditions can be adjusted via implementing acts to reflect actual costs, market changes, or the scale of participation, provided they remain proportionate and cost-effective.

Related

This is general information about a draft EU regulation, not legal advice.